We don’t want to bore you to death with a history lesson, but it is important to understand what a VA Mortgage is, and how it can save you money. We will weigh the pros and cons and compare them to conventional or traditional mortgage loans. If you are eligible, you can take advantage of these loan programs offered by the Veteran’s Administration which can save you a lot of money and time! Today, I will explain What is a VA Mortgage Loan.
If you are in or were in the military in any capacity, you have probably heard of the G.I. Bill, the official name is the Servicemen’s Readjustment Act of 1944. The law was created to provide a wide range of benefits for veterans (G.I.s) who were returning home from WWII. The core benefits to veterans were loans to start a farm or business, tuition and living expenses for education, unemployment compensation, and low-cost mortgages. This program was relativity limited until an update in 1992 which opened the program up to include the National Guard and Reservists.
The VA does not issue mortgages or loans rather they guarantee the loans. What this means to you is that there is less risk to the bank or mortgage company that is making these loans. As mortgage lending is a risk-based pricing model, lower risk to the bank means a lower interest rate for you, this and the easy qualification process may make a VA Mortgage a great option.
Key Benefits of the VA Mortgage Program
- Streamline Refinance Process– little or no documentation refinance
- Reduced interest rates- On average VA rates are .5-1% lower than Conv.
- $0 Money down on purchase transactions
- Higher Debt to Ratios than conventional Loans
- No Pre-Payment Penalties
- Less Stringent Underwriting
- Easy Qualification
- NO PMI- Private Mortgage Insurance
When choosing to buy a home or refinance your current one, there are many options available to you; Fixed rate loans, ARM Mortgages, Conventional Loans, FHA, Fannie Mae, Freddy Mac, VA, and the list goes on! The most common would be considered the Conventional Loan. Here we will take a brief moment to compare the main difference between them.
Va Mortgage Vs. Conventional Mortgage
Here you will find some of the benefits on a comparison basis
Down Payment: In today’s tumultuous mortgage market, many buyers need to come up with 10-20% for a down payment and then add in closing costs on top of that! Since the VA Loans are guaranteed by the federal government, you can get a $0 down payment loan. This is currently one of the only programs that still allow 100% financing! See if you qualify now.
Monthly Savings: One of the biggest concerns for our Veterans or for anybody, is how much extra money you can keep in your pocket each month! VA loans have several unique features that allow you to keep more of your money in your pocket. These features include; reduced mortgage interest rates, NO PMI, reduced or no down payments, no pre-payment penalties, and many more. To see a full list of money-saving features, click on the type of VA Mortgage you are looking for below:
- VA Streamline Refinance (IRRRL)
- VA Cash-Out Refinance
- VA Purchase Loan
While there is no one shoe to fit all borrowers, when comparing apples to apples, obtaining a VA mortgage is a much less stringent process. Since the government is backing these loans, the banks have less risk and therefore have reduced qualification standards. In fact, on some products such as the Streamlined Refinance, there is not even an appraisal or an underwriting review! In order to find out the exact qualification standards for each type of mortgage and to get a free no-obligation consultation on your options, take the first step below: